SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended January 1, 2000.
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-549
SCHULTZ SAV-O STORES, INC.
(Exact name of registrant
as specified in its charter)
Wisconsin 39-0600405
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2215 Union Avenue
Sheboygan, Wisconsin 53081
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (920) 457-4433
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
--------------
Common Stock, $0.05 par value
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:
Yes _X_ No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
Aggregate market value of voting stock held by non-affiliates of the registrant
as of March 20, 2000: $48,361,461.
Number of shares outstanding of the registrant's Common Stock as of March 22,
2000: 5,943,569.
PORTIONS OF THE FOLLOWING DOCUMENTS ARE INCORPORATED HEREIN BY REFERENCE:
1999 Annual Report to Shareholders (incorporated by reference into Parts II
and IV to the extent indicated therein).
Definitive Proxy Statement for 2000 annual meeting of shareholders (to be
filed with the Commission under Regulation 14A within 120 days after the
end of the registrant's fiscal year and, upon such filing, to be
incorporated by reference into Part III to the extent indicated therein).
PART I
Special Note Regarding Forward-Looking Statements
We make certain "forward-looking statements" in this Form 10-K, such as
statements about our future plans, goals and other events that have not yet
occurred. We intend that these statements will qualify for the safe harbors from
liability provided by the Private Securities Litigation Reform Act of 1995. You
can generally identify these forward-looking statements because we use words
such as we "believe," "anticipate," "expect" or similar words when we make them.
Whether or not these forward-looking statements will be accurate in the future
will depend on certain risks, including risks associated with:
o the presence of intense competition in our marketplace;
o our ability to identify and develop new market locations for expansion
purposes;
o our ability to obtain reasonable vendor marketing funds for
promotional purposes;
o our business systems requirements;
o our ability to continue to recruit, train and retain quality franchise
and corporate retail store operators; and
o the potential recognition of repositioning charges resulting from
potential closures, conversions or consolidations of our franchised
and corporate stores, whether due to the competitive nature of our
industry, to the quality of our franchised and corporate retail store
operators or to other factors.
You should consider these risks and factors and the impact they may have when
you evaluate our forward-looking statements. We make these statements based only
on our knowledge and expectations on the date of this report. We will not
necessarily update these statements or other information in this report based on
future events or circumstances. Please read this entire report to better
understand our business and the risks associated with our operations.
Item 1. Business.
--------
General
Schultz Sav-O Stores, Inc. is engaged in distributing food and related
products at wholesale and retail. As of January 1, 2000, we franchised 69 and
owned 19 retail supermarkets under the Piggly Wiggly(R) name. While we have a
presence in some larger metropolitan areas, we have attempted to develop a niche
for serving the food shopping needs of customers in smaller and suburban
communities within our market areas.
We are the primary supplier to our 88 franchised and corporate-owned Piggly
Wiggly supermarkets. We also serve as a wholesaler to a number of smaller,
independently operated retail supermarkets and convenience stores in our market
areas.
We believe that we have established ourselves as a niche food marketer in
small to mid-size markets by delivering the product variety, quality of
perishable products, pricing and promotional programs traditionally found only
in large metropolitan markets. As a hybrid of retailer and wholesaler, we have
created a "virtual chain" of retail stores served by a vertically-integrated
wholesaler. In 1999, our virtual chain had approximately $750 million in retail
sales. The virtual chain encompasses all Piggly Wiggly supermarkets, both
franchised and owned, in a single, coordinated merchandising and advertising
program which typically includes:
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o a weekly newspaper ad insert;
o outdoor boards;
o television and radio spots;
o sponsorship of entertainment and charitable events; and
o our Piggly Wiggly Preferred Club(R) Card program.
We believe that this coordinated program allows us to leverage the combined
buying power of all our franchised and corporate stores and deliver a powerful
and effective promotional vehicle for our participating vendor partners.
Additionally, we believe that we provide our franchised stores with
cost-effective administrative support services and financial resources that
enable the operation of efficient, contemporary supermarkets, while the
independent retail ownership of our franchisees provides the entrepreneurial
spirit and community involvement that we believe is an integral part of
marketing in smaller markets. The successful combination of these elements
creates the partnership between us and our franchisee retailers that results in
a virtual chain of coordinated and integrated retail food distribution. By
operating as a virtual chain, we are able to achieve superior performance
compared to traditional wholesalers, yet avoid significant direct capital
investments at the retail level to grow our business. The franchisee retailer,
as part of the virtual chain, benefits from lower cost of products and the
coordinated promotional activity normally associated only with larger retail
grocery chains. We believe that this structure enables us to leverage the
favorable elements of both a wholesaler and a retailer, giving us and our
franchisees a unique advantage in our marketplace. We believe that this
advantage has been a key component in our success over the past few years as the
virtual chain concept has evolved.
We supply a variety of products to our franchised and corporate
supermarkets and other wholesale customers, primarily from our warehouse and
distribution center in Sheboygan, Wisconsin. We also provide our franchised and
corporate supermarkets and other customers with fresh, frozen and processed
meat, eggs and deli products from a third-party distribution facility in
Milwaukee, Wisconsin. Through arrangements with several vendors, we also offer a
line of carbonated soft drinks, fruit drinks and drinking and distilled water
under our Springtime(TM) label.
We are a Wisconsin corporation organized in 1912 and maintain our corporate
headquarters at 2215 Union Avenue, Sheboygan, Wisconsin 53081. You can visit our
internet website at http://www.shopthepig.com.
Wholesale Operations
For several years, we have emphasized our wholesale distribution business
and the associated refinement of our franchise store base which, combined with
our unique marketing and merchandising program, has created an effective and
efficient virtual chain.
We believe that one of the competitive advantages we provide to our
franchised supermarkets through our "virtual chain" strategy is our
value-oriented customer merchandising and community-specific marketing support
program, pursuant to which franchisees participate with corporate stores in
systemwide promotions and other merchandising events. Through a variety of
partnering, merchandising and marketing programs, we benefit our franchisees
through additional sales resulting from heightened consumer name recognition and
in-store merchandising programs, combined with special promotional pricing.
Additional services that we provide to our franchisees include:
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o retail performance counseling and supervision;
o retail accounting;
o preparation of store payrolls;
o preparation of print, electronic and outdoor media advertising
(including various point-of-sale materials);
o assistance in the selection and analysis of store locations;
o financing and lease negotiations;
o merchandising planning;
o equipment selection and sourcing;
o engineering services, including store design, floor layout and
facility project management;
o retail technology implementation and support;
o labor planning and scheduling; and
o product category supervision.
We provide some of these services as part of the franchise relationship, while
other services are provided under a separate fee arrangement intended to cover
our costs.
In addition to continuing to leverage the combined merchandising power of
our "virtual chain" of stores that we service or operate, we have created an
advertising alliance with another operator and franchisor of Piggly Wiggly
stores in South Carolina and completed our first combined effort in January
2000. We will endeavor to expand these efforts to other non-competing
supermarkets in 2000.
As part of implementing our corporate strategy to improve the profitability
of our corporate retail operations, we continue to seek opportunities to expand
and acquire corporate and franchise stores, to convert or close underperforming
stores and to enter new markets. In 1999, we:
o opened a new market franchise store in Cottage Grove, Wisconsin;
o closed an older franchise store and replaced it with a more
competitive and larger facility in Fort Atkinson, Wisconsin;
o consolidated two franchise stores, resulting in the closure of one
franchise store in St. Francis, Wisconsin;
o converted formerly independent operators as franchisees in Niagara and
Winneconne, Wisconsin; and
o converted an Oshkosh, Wisconsin franchise store to a corporate store.
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The following table shows our development of, and changes in, our
franchised and corporate retail supermarkets for the periods presented:
Franchise Supermarkets | Corporate Supermarkets
--------------------------------------------------------------------------------
Number of 1995 1996 1997 1998 1999 | 1995 1996 1997 1998 1999
Supermarkets ---- ---- ---- ---- ---- | ---- ---- ---- ---- ----
- - ------------ |
Beginning of Year 65 66 68 68 68 | 20 19 16 18 18
|
New Market Supermarkets(a) 1 1 1 1 1 | -- -- 1 -- --
|
Replacement Supermarkets(b) 3 2 1 1 1 | -- -- -- 1 --
|
Converted to/from Franchise(c) -- 1 (1) -- (1) | -- (1) 1 -- 1
|
Terminated Operations(d) (3) (2) (2) (2) (2) | (1) (2) -- (1) --
|
New Franchises(e) -- -- 1 -- 2 | -- -- -- -- --
|
End of Year 66 68 68 68 69 | 19 16 18 18 19
== == == == == | == == == == ==
|
Remodeled Supermarkets(f) 6 1 3 2 4 | -- -- -- -- --
- - ---------------
(a) New market supermarkets are newly constructed supermarkets in market
areas not recently served by us.
(b) Replacement supermarkets are newly constructed supermarkets whose
opening corresponds with the closure of a nearby franchised or
corporate supermarket.
(c) Supermarkets that are converted from corporate to franchise units, or
vice versa, are included as reductions to supermarket totals in one
category and corresponding additions to totals in the other category.
(d) Terminated operations represent supermarkets that are no longer going
concerns, including replaced supermarkets.
(e) New franchises are additions to our franchise group, other than through
conversion from corporate supermarkets.
(f) Remodeled supermarkets represent supermarkets that have undergone
substantial expansion and/or remodeling totaling at least $300,000.
The following projects are scheduled for completion in 2000:
o construction of one new market franchise store in Kewaskum, Wisconsin;
o replacement of existing franchise supermarkets in Pardeeville and New
Holstein, Wisconsin;
o expansion of existing franchise stores in Jackson and Kaukauna,
Wisconsin; and
o replacement of one corporate store in Racine, Wisconsin.
Additionally, we expect to have one replacement franchise store in Slinger,
Wisconsin and one replacement corporate store in Zion, Illinois in 2001.
We are the primary supplier to all of our franchised and corporate
supermarkets. We also serve as a wholesaler to other smaller independent retail
stores in our market area, accounting for approximately 2% of our 1999 net
sales.
Franchisees pay us fees, determined by the retail sales of their
supermarkets. We do not charge an initial fee to franchisees for granting a
franchise. Consistent with industry practice, in certain situations, we provide
credit
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enhancements to certain qualified franchisees by (i) leasing the franchisee's
supermarket premises and, in turn, subleasing the premises to the franchisee
and/or (ii) guaranteeing a portion of the franchisee's bank borrowings.
Under our Piggly Wiggly Master Franchise Agreement, our franchise territory
includes all of Wisconsin, the upper peninsula of Michigan and designated
counties in northern Illinois, southeastern Minnesota and eastern Iowa. Our
franchise rights are of unlimited duration and are not subject to any specific
termination provision. We are required to pay franchise fees to the current
franchisor in parts of our market areas. The only other material obligation
imposed on us in our franchise territory is that the supermarkets operated under
the Piggly Wiggly name must comply with the standards imposed on supermarkets in
the Piggly Wiggly system. We believe that our own franchised and corporate store
standards exceed the Piggly Wiggly system standards.
Retail Operations
Our franchised and corporate supermarkets stock a comprehensive selection
of groceries, frozen foods, prepared foods, fresh produce, meat, poultry, eggs
and dairy products. Our franchised and corporate supermarkets also allocate
display space to non-food items, such as health and beauty aids, housewares,
magazines and periodicals, video cassette rentals, flowers and plants, greeting
cards and general merchandise. Our franchised and corporate supermarkets carry a
broad range of branded merchandise and private-label store branded product
alternatives to branded merchandise. In general, the private-label products
carried by our franchised and corporate supermarkets have lower selling prices,
but higher gross profit margins, than branded merchandise. Consistent with
trends generally within the industry, we continue to experience increases in
retail customer demand for store brands and believe that our Topco-procured line
of branded products is satisfying this consumer trend. See "Purchasing and
Distribution." Based on our internal wholesale price index, inflation did not
have a significant effect on sales between 1999 and 1998, except with regard to
tobacco products.
The Piggly Wiggly Preferred Club(R) Card marketing program, a
customer-friendly, card-based system, is in place in all our corporate and
franchised supermarkets. We designed the Piggly Wiggly Preferred Club Card to
reward current customers and attract new customers by offering "clipless
coupons" on weekly advertised specials and "automatic" savings on monthly store
specials. The card, processed by a standardized front-end point-of-sale system,
allows us to maintain a valuable, integrated database that we use to identify
our best customers and their preferences so that the virtual chain of stores can
better serve its customers. We will never sell customer-specific information in
our data base for use by third parties. The card also doubles as a check-cashing
and video rental identification card. Additionally, the Piggly Wiggly Preferred
Club Card program affords the ability to issue point-of-sale coupons redeemable
on future purchases. We believe that the Piggly Wiggly Preferred Club Card and
the coordinated marketing and merchandising program it supports will be key
components to our future growth.
Our franchised supermarkets range in size from 8,340 square feet to 47,000
square feet, with an average of 25,500 square feet. Our corporate supermarkets
range in size from 19,980 square feet to 54,850 square feet, with an average of
34,990 square feet. All of our franchised and corporate supermarkets contain
several perishable or specialty service departments, including:
o fresh and processed meat;
o take-home entrees and snacks;
o fresh fruits and vegetables;
o fresh seafood;
o delicatessen;
o flowers and plants; and
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o baked goods.
Several supermarkets also contain or provide one or more of the following:
o wine and spirit sales;
o video rentals;
o lottery sales;
o photo processing services;
o TicketMaster(R) ticket centers;
o in-house banking services;
o automated teller machines; and
o on-line debit and credit card check-out services.
Certain franchised and corporate stores continue to fail to meet certain
financial performance goals. We closed one such store during 1999. In order to
further improve our results of operations, we continue to evaluate various
business alternatives relating to underperforming operations, including the sale
or conversion of these stores, closing stores and implementing other operational
changes.
Purchasing and Distribution
We purchase groceries in sufficient volume to qualify for favorable price
brackets for most items. We purchase brand name grocery merchandise directly
from the manufacturers or processors and purchase produce, meat and seafood from
a variety of sources. We purchase substantially all of our private label items
and fresh meats through Topco Associates, Inc. Topco is a national purchasing
cooperative whose member-owners consist of 31 regional supermarket chains and
food services organizations who collectively operate approximately 2,050 stores.
According to Topco data, its member-owners accounted for approximately 13% of
United States grocery store sales volume in 1999. In 1999, purchases through
Topco accounted for approximately 13% of our total inventory purchases. We also
purchase store and warehouse equipment and supplies, primarily bags and
packaging material, through Topco. Topco's size and purchasing power enable it
to employ large-volume, low-cost purchasing techniques on behalf of its
member-owners.
We and our direct-contract, third-party distribution center supplied more
than 73% of the products supplied to our franchised and corporate stores in
1999. The remainder were supplied by direct store delivery vendors. We own our
364,000 square-foot distribution center in Sheboygan, Wisconsin. With the
exception of fresh, frozen and processed meat, eggs and deli products, we
distribute all products that we supply from our Sheboygan facility. While we
perform the buying function, a third-party contractor in Milwaukee, Wisconsin
performs the distribution services for our meat operations. We believe that this
arrangement provides us with operating cost efficiencies and the ability to
expand our wholesale product offerings and better satisfy wholesale customer
delivery schedules through improved capacity.
As described above under "Wholesale Operations," we believe that one of our
competitive advantages is the community-oriented marketing programs that we
provide to franchisees as part of our "virtual chain" strategy. Coordinated
weekly newspaper ad inserts, high-visibility outdoor billboard advertising and
television and radio advertising stress the value and customer service provided
by our local Piggly Wiggly supermarkets. We also
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sponsor local events and festivals throughout the marketing area to improve our
Piggly Wiggly name recognition, such as the Midwest's largest fireworks display
at Milwaukee's Summerfest lakefront music festival.
We operate a leased, full-service trucking fleet, which consists of 22
tractors and 41 refrigerated trailers. We augment our transportation
requirements with temporary leasing arrangements as conditions warrant. PW
Trucking, Inc., our wholly-owned subsidiary, provides contract and common
carrier services throughout our operating territory. Revenues from unrelated
parties generated by this business were nominal in 1999 and are expected to be
nominal in 2000.
Competition
The wholesale and retail food industry is highly competitive. At the
wholesale level, we compete with regional and national wholesalers, such as
Fleming Companies, Inc., SuperValu Inc., Roundy's, Inc. and Nash Finch Co. We
believe that key competitive factors include the provision of the following
services to franchise customers:
o credit enhancements and working capital support;
o advertising;
o retail performance and supervision counseling;
o accounting and financial services;
o merchandising;
o facilities engineering;
o design and project management; and
o retail technology support.
We believe that our distribution facilities and the wide range of support
and marketing services provided to our franchised and corporate retail
supermarkets allow us to provide prompt and efficient, low-priced, high-quality
products and important supplemental services to our franchised and corporate
supermarkets and other customers.
The degree of competition at the retail level varies with store location.
In most of our franchised and corporate supermarket locations, we compete
primarily with local retail operators, virtually all of whom are affiliated with
competing wholesalers through arrangements similar to those we have with our
franchisees. In some of our supermarket locations, however, we also compete with
national and regional retail chain stores, such as Sentry Food Stores, Pick `N
Save, Cub Foods, Jewel Food Stores, Dominicks Finer Foods, Copp's Supermarkets
and Kohl's Food Stores. Other competitors include the general merchandise,
wholesale club and supercenter format stores, such as Wal-Mart Stores, Inc.,
K-Mart Corp., ShopKo Stores, Inc. and others. We believe that the principal
retail competitive factors include:
o price;
o product quality and variety;
o store location and appearance; and
o the quality of a store's perishable product and service departments.
-8-
We believe our supermarkets' emphasis on low-cost, high-quality products,
community-based multi-media marketing and merchandising programs and a high
degree of in-store customer service and friendliness provide our franchised and
corporate supermarkets with a competitive advantage in many retail market areas.
Certain of our competitors at both the wholesale and retail level may have
a competitive advantage resulting from utilizing lower-cost, non-union
workforces. Certain of our competitors have greater financial resources and
marketing budgets than we do. Also, certain competitors using the general
merchandise, wholesale club format or supercenter format may choose to carry and
market a less extensive variety of products, which may allow them to sell such
items at a lower per unit cost than we do.
Employees
As of January 1, 2000, we employed approximately 1,790 persons, including
approximately 1,330 in the operation of our corporate retail supermarkets. A
majority of our corporate retail employees are employed on a part-time basis. Of
our remaining employees, approximately 200 are engaged in warehousing and
trucking activities and approximately 260 are corporate and administrative
personnel. Seven retail collective bargaining agreements, covering a total of
approximately 720 employees expire in 2000. We do not currently anticipate any
strikes, work stoppages or slowdowns in connection with renewing such
agreements.
Item 1A. Executive Officers.
------------------
Name and Age Positions and Offices with the Company
------------ --------------------------------------
James H. Dickelman, 52...Chairman of the Board, President and Chief Executive
Officer
Michael R. Houser, 48....Executive Vice President-Marketing and Merchandising
John H. Dahly, 59........Executive Vice President, Chief Financial Officer and
Secretary
William K. Jacobson, 49..Senior Vice President-Retail Operations and Development
and Assistant Secretary
Elwood F. Winn, 49.......Senior Vice President-Strategic Planning
Armand C. Go, 38.........Vice President, Treasurer and Chief Accounting Officer
Larry D. Hayes, 57.......Vice President-Meat, Bakery and Deli Operations
John S. Kwas, 60.........Vice President-Grocery Procurement
Thomas J. Timler, 42.....Vice President-Business Systems Support Group
Messrs. Dickelman, Houser, Dahly and Jacobson are also members of our Board
of Directors.
Executive officers are generally elected annually at the annual meeting of
our Board of Directors held on the date of our annual meeting of shareholders.
Each executive officer holds office until his successor has been elected or
until his prior death, resignation or removal.
All of our executive officers have served in the positions indicated or in
other management positions with Schultz Sav-O Stores for more than five years,
except that Mr. Winn was President and Chief Executive Officer of Certified
Grocers Midwest Inc. (CGM), Hodgkins, Illinois, from 1992 until October 1998
and, subsequently, consultant to CGM until September 1999.
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Item 2. Properties.
----------
As is typical in our industry, a substantial portion of our retail store
facilities are leased. As of January 1, 2000, we leased 18 corporate
supermarkets and owned one supermarket. The leased supermarkets range in size
from 19,980 to 54,850 square feet, with an average of 34,360 square feet.
We generally lease our supermarkets from nonaffiliated real estate
developers under long-term leases. Such leases generally contain initial terms
of 15 to 20 years, with several five-year renewal options. None of such existing
lease arrangements contain repurchase options; nor do we own the land underlying
any of such supermarkets. As of January 1, 2000, we subleased 53 of our leased
supermarkets and leased one owned supermarket to independent operators who are
our wholesale customers and franchisees.
Expansions continue at two franchise and one corporate supermarket. These
projects are expected to increase the aggregate square footage of selling space
at such stores by approximately 25%. In addition, we are constructing a new
market franchise store and three replacement franchise stores.
We own our distribution center and headquarters complex in Sheboygan,
Wisconsin which occupies approximately nine acres of a 16-acre site that we own.
The facility provides approximately 30,500 square feet of space for offices and
related activities and approximately 364,000 square feet of warehouse space. We
also lease approximately 14,500 square feet of office space in Sheboygan under a
lease expiring in August 2003, which is used for customer support services.
Item 3. Legal Proceedings.
-----------------
There are no material legal proceedings to which we are a party or to which
any of our property is subject, other than routine litigation incidental to our
business. No material legal proceedings were terminated during the fourth
quarter of 1999.
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
No matters were submitted to a vote of our shareholders during the fourth
quarter of 1999.
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PART II
Item 5. Market for Our Common Stock and Related Shareholder Matters.
-----------------------------------------------------------
Pursuant to our program for compensation of independent directors, we
issued 556 shares of our common stock to each of our four nonemployee directors
who do not receive fees for professional services provided to Schultz Sav-O
Stores on January 27, 2000. Such issuances were exempt from registration under
the Securities Act of 1933 in accordance with Section 4(2) of that act.
Pursuant to General Instruction G to Form 10-K ("Instruction G"), the other
information required by this Item is incorporated herein by reference from
information included under the caption entitled "Common Stock Information" set
forth in our 1999 Annual Report to Shareholders (the "Annual Report").
Item 6. Selected Financial Data.
-----------------------
Pursuant to Instruction G, the information required by this Item is
incorporated herein by reference from information included under the caption
entitled "Five-Year Financial Highlights" set forth in the Annual Report.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
------------------------------------------------------------------------
of Operations.
-------------
Pursuant to Instruction G, the information required by this Item is
incorporated herein by reference from information included under the caption
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" set forth in the Annual Report.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
----------------------------------------------------------
We believe that our exposure to market risk related to changes in foreign
currency exchange rates, interest rate fluctuations and trade accounts
receivable is immaterial.
Item 8. Financial Statements and Supplementary Data.
-------------------------------------------
Pursuant to Instruction G, the Consolidated Balance Sheets of the Company
as of January 1, 2000 and January 2, 1999, the Consolidated Statements of
Earnings, Cash Flows and Shareholders' Investment for each of the three fiscal
years in the period ended January 1, 2000, together with the related Notes to
Consolidated Financial Statements (including supplementary financial data), are
incorporated herein by reference from information included under the captions
having substantially the same titles as set forth in the Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
----------------------------------------------------------------------
Financial Disclosure.
--------------------
Not applicable.
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PART III
Item 10. Directors and Executive Officers of the Company.
-----------------------------------------------
Pursuant to Instruction G, the information required by this Item (other
than such information regarding executive officers which appears in Item 1A
hereof and information required by Item 405 of Regulation S-K, which is
inapplicable) is incorporated by reference from information included under the
caption entitled "Election of Directors" set forth in our definitive Proxy
Statement for our 2000 annual meeting of shareholders (the "Proxy Statement").*
* The Proxy Statement will be filed with the Securities and Exchange
Commission pursuant to Regulation 14A within 120 days after the end of
our fiscal year.
Item 11. Executive Compensation.
----------------------
Pursuant to Instruction G, the information required by this Item is
incorporated by reference from information included under the caption entitled
"Executive Compensation" set forth in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
--------------------------------------------------------------
Pursuant to Instruction G, the information required by this Item is
incorporated by reference from information included under the captions entitled
"Stock Ownership of Management and Others" and "Election of Directors" set forth
in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions.
----------------------------------------------
Pursuant to Instruction G, information required by this Item is
incorporated by reference from information under the caption entitled
"Compensation Committee and Stock Option Committee Interlocks and Insider
Participation" set forth in the Proxy Statement.
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PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
---------------------------------------------------------------
(a) The following documents are filed as a part of this Form 10-K:
1. Financial Statements.
--------------------
Consolidated Balance Sheets as of January 1,
2000 and January 2, 1999
Consolidated Statements of Earnings, Cash Flows
and Shareholders' Investment for the fiscal years
1999, 1998 and 1997
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
The foregoing Financial Statements are incorporated by reference to the
pocket part included in the Company's Annual Report to Shareholders for the
fiscal year ended January 1, 2000.
The additional information referred to under "Financial Statement
Schedules" below is filed as part of this Form 10-K and should be read in
conjunction with the financial statements referred to above.
Page Reference:
Form 10-K
---------
2. Financial Statement Schedules.
-----------------------------
Report of Independent Public F-1
Accountants
Schedule VIII - Valuation and F-2
Qualifying Accounts and Reserves
All other schedules have been omitted as not required or not applicable, or
the information required to be shown thereon is included in the financial
statements and related notes.
3. Exhibits and Reports on Form 8-K.
--------------------------------
(a) The exhibits filed or incorporated by reference herewith are as
specified in the Exhibit Index included herein.
(b) We filed no reports on Form 8-K during the fourth quarter of
fiscal year 1999.
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SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SCHULTZ SAV-O STORES, INC.
Date: March 22, 2000 By /s/ John H. Dahly
------------------------------------
John H. Dahly
Executive Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed as of the date above by the following
persons on behalf of the Company in the capacities indicated.
/s/ James H. Dickelman /s/ William K. Jacobson
- - --------------------------------------- ------------------------------------
James H. Dickelman, Chairman of William K. Jacobson, Director
Board, President, Chief Executive
Officer and Director (Principal
Executive Officer)
/s/ John H. Dahly /s/ Michael R. Houser
- - --------------------------------------- ------------------------------------
John H. Dahly, Executive Vice President, Michael R. Houser, Director
Chief Financial Officer, Secretary and
Director (Principal Financial Officer)
/s/ Armand C. Go /s/ Martin Crneckiy, Jr.
- - --------------------------------------- ------------------------------------
Armand C. Go, Vice President, Treasurer Martin Crneckiy, Jr., Director
and Chief Accounting Officer
(Principal Accounting Officer)
/s/ Walter G. Winding /s/ R. Bruce Grover
- - --------------------------------------- ------------------------------------
Walter G. Winding, Director R. Bruce Grover, Director
/s/ Steven R. Barth /s/ Bruce J. Olson
- - --------------------------------------- ------------------------------------
Steven R. Barth, Director Bruce J. Olson, Director
-14-
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited, in accordance with generally accepted auditing standards, the
financial statements included in Schultz Sav-O Stores, Inc.'s annual report to
shareholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated February 4, 2000. Our audit was made for the purpose of
forming an opinion on those statements taken as a whole. The schedule listed in
the index to financial statements is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states, in all material respects, the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
February 4, 2000.
F-1
SCHULTZ SAV-O STORES, INC.
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE FISCAL YEARS 1999, 1998 AND 1997
Allowance for Doubtful Accounts--
Changes in the allowance for doubtful accounts are summarized as follows:
1999 1998 1997
------------ ------------ ------------
Balance, beginning of year $4,300,000 $3,950,000 $3,650,000
Provision charged to earnings 820,000 350,000 656,000
(820,000) -- (356,000)
---------- --------- ----------
(Writeoffs)/recoveries, net
Balance, end of year $4,300,000 $4,300,000 $3,950,000
========== ========== ==========
F-2
EXHIBIT INDEX
SCHULTZ SAV-O STORES, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED JANUARY 1, 2000
-----------------------------------------
Exhibit No. Description
- - ----------- -----------
3.1 Restated Articles of Incorporated, as amended. Incorporated by
reference to Exhibit 3.1 to our Annual Report on Form 10-K for
the year ended December 31, 1988.
3.2 By-Laws, as amended and restated as of March 16, 1999.
Incorporated by reference to Exhibit 3.2 to our Annual Report on
Form 10-K for the year ended January 2, 1999.
4.1 Restated Articles of Incorporation, as amended (included as
Exhibit 3.1).
As summarized in Notes (4) and (8) of the Notes to Financial
Statements incorporated by reference from our 1999 Annual Report
to Shareholders, as part of Parts II and IV of this Form 10-K, we
have various outstanding long-term debt and capital lease
obligations. None of such obligations individually exceeds 10% of
our total assets. We hereby agree to furnish to the Commission,
upon its request, a copy of each instrument with respect to such
obligations.
10.1 Master Franchise Agreement, dated April 23, 1982, between
Commodores Point Terminal Corporation and Piggly Wiggly
Corporation. Incorporated by reference to Exhibit 10.1 to our
Annual Report on Form 10-K for the year ended January 1, 1982.
10.2 Agreement, dated August 1, 1982, between Schultz Sav-O Stores and
Commodores Point Terminal Corporation. Incorporated by reference
to Exhibit 10.2 to our Annual Report on Form 10-K for the year
ended January 1, 1982.
10.3 Amendment to Master Franchise Agreement, dated October 15, 1982,
between Schultz Sav-O Stores and Piggly Wiggly Corporation.
Incorporated by reference to Exhibit 10.3 to our Annual Report on
Form 10-K for the year ended January 1, 1982.
10.4 Amendment No. 2 to Piggly Wiggly Master Franchise Agreement,
dated June 3, 1998, between Schultz Sav-O Stores and Piggly
Wiggly Corporation. Incorporated by reference to Exhibit 10.2 to
our Quarterly Report on Form 10-Q for the period ended April 25,
1998.
10.5 Form of Director/Officer Indemnity Agreement. Incorporated by
reference to Exhibit 10.4 to our Annual Report on Form 10-K for
the year ended January 2, 1988. This Agreement is required to be
filed as an exhibit to this Form 10-K pursuant to Item 14(c) of
Form 10-K.
E-1
Exhibit No. Description
- - ----------- -----------
10.6 Form of Key Executive Employment and Severance Agreement, dated
as of October 19, 1990, between Schultz Sav-O Stores and each of
James H. Dickelman, John H. Dahly, and Michael R. Houser, and
dated as of January 31, 1997, between Schultz Sav-O Stores and
William K. Jacobson. Incorporated by reference to Exhibit 10.5 to
our Annual Report on Form 10-K for the year ended December 29,
1990. This agreement is required to be filed as an exhibit to
this Form 10-K pursuant to Item 14(c) of Form 10-K.
10.7 Form of amendment to Key Executive Employment and Severance
Agreement between Schultz Sav-O Stores and each of James H.
Dickelman, John H. Dahly, Michael R. Houser, and William K.
Jacobson. Incorporated by reference to Exhibit 10.13 to our
Quarterly Report on Form 10-Q for the period ended July 18, 1998.
This agreement is required to be filed as an exhibit to this Form
10-K pursuant to Item 14(c) of Form 10-K.
10.8 Membership and Licensing Agreement dated August 1, 1973 by and
between Topco Associates, Inc. (Cooperative) and Schultz Sav-O
Stores. Incorporated by reference to Exhibit 10.6 to our Annual
Report on Form 10-K for the year ended December 30, 1996.
10.9 Articles of Incorporation of Topco Associates, Inc.
(Cooperative). Incorporated by reference to Exhibit 10.12 to our
Annual Report on Form 10-K for the year ended December 31, 1988.
10.10 Bylaws of Topco Associates, Inc. (Cooperative), as amended
through June 7, 1996. Incorporated by reference to Exhibit 10.8
to our Annual Report on Form 10-K for the year ended December 30,
1996.
10.11 1990 Stock Option Plan, as amended and restated as of October 15,
1998. Incorporated by reference to Exhibit 10.16 to our Quarterly
Report on Form 10-Q for the period ended October 10, 1998. This
plan is required to be filed as an exhibit to this Form 10-K
pursuant to Item 14(c) of Form 10-K.
10.12 1995 Equity Incentive Plan, as amended and restated as of January
28, 1999. Incorporated by reference to Exhibit 10.12 to our
Annual Report on Form 10-K for the year ended January 2, 1999.
This plan is required to be filed as an exhibit to this Form 10-K
pursuant to Item 14(c) of Form 10-K.
10.13 Form of Nonqualified Stock Option Agreement under 1995 Equity
Incentive Plan. Incorporated by reference to Exhibit 10.13 to our
Annual Report on Form 10-K for the year ended January 2, 1999.
This form of agreement is required to be filed as an exhibit to
this Form 10-K pursuant to Item 14(c) of Form 10-K.
10.14 Schultz Sav-O Stores, Inc. Executive Benefit Restoration Plan.
Incorporated by reference to Exhibit 10.10 to our Annual Report
on Form 10-K for the year ended December 31, 1994. This Plan is
required to be filed as an exhibit to this Form 10-K pursuant to
Item 14(c) of Form 10-K.
E-2
Exhibit No. Description
- - ----------- -----------
10.15 Schultz Sav-O Stores, Inc. Officer Annual Incentive Plan, as
amended and restated as of January 28, 1999. Incorporated by
reference to Exhibit 10.15 to our Annual Report on Form 10-K for
the year ended January 2, 1999. This plan is required to be filed
as an exhibit to this Form 10-K pursuant to Item 14(c) of Form
10-K.
10.16 Loan Agreement, dated as of December 3, 1992, among Schultz Sav-O
Stores, M&I Marshall & Ilsley Bank and Firstar Bank (Milwaukee),
as amended as of December 31, 1998. Incorporated by reference to
Exhibit 10.16 to our Annual Report on Form 10-K for the year
ended January 2, 1999.
13 Portions of the 1999 Annual Report to Shareholders expressly
incorporated by reference into this Form 10-K.
21 Subsidiary of Registrant.
23 Consent of Independent Public Accountants.
27 Financial Data Schedule.
99 Definitive Proxy Statement for the 2000 Annual Meeting of
Shareholders (to be filed with the Commission under Regulation
14A within 120 days after the end of our fiscal year and, upon
such filing, incorporated by reference herein to the extent
indicated in this Form 10-K).
E-3